Question: 5. Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns: Market ReturnAggressive StockDefensive Stock 89
5. Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns: Market ReturnAggressive StockDefensive Stock 89 2.5% 4.3% 20 27 14 a. What are the betas of the two stocks? (Round your answers to 2 decimal places.) b. What is the expected rate of return on each stock if the market return is equally likely to be 8% or 20%? (Round your answers to 2 decimal places.) c. If the T-bill rate is 8%, and the market return is equally likely to be 8% or 20%, what are the alphas of the two stocks? (Negative values should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
